August marked our sixth anniversary at The Shareholder Commons, and we have been taking a hard look at where we have been, and where we want to go over the next phase of our organization’s work.

In 2020, the notion that diversified investors need to focus on the impact that companies have across their portfolios was established in theory, but not so much in practice. For example, at that point in time, we don’t believe that anyone had ever argued that shareholders should support a proposal at a company because its practices were going to reduce the returns of other companies in investors’ portfolios. A primary goal of TSC was to change that. Working together with a group of pioneering investors, we facilitated the submission of 20 proposals for the 2021 proxy season making the portfolio-first argument: we wanted to show what system stewardship looked like in practice. We have been refining the idea ever since, helping investors file guardrail proposals that ask companies to curtail practices that threaten the environmental and social systems that support a prosperous economy and protect portfolio returns.

Fast forward to 2025: when Rezonanz published a benchmark of asset manager voting across 428 proposals, about 60 of them (more than 14%) were supported by such portfolio-level arguments, showing that portfolio-level impact has been adopted by a critical mass of shareholders as an explicit stewardship strategy. This level of adoption indicates that our exemplary campaigns are no longer necessary. Accordingly, 2025 marks the completion of our own advocacy efforts as we begin to concentrate on strengthening the burgeoning field of system stewardship.

What does this mean for TSC? We will continue to publish Portfolios on the Ballot (POTB), which comes out in advance of each proxy season and highlights shareholder initiatives supported by system stewardship. (To get emails about POTB, be sure to sign up for our separate POTB email digest.) Additionally, TSC will continue the field building work we have been doing through conferences, writing, webinars, and other media.

In addition, TSC will be starting an exciting new effort to develop a consensus framework for investors pursuing system stewardship. The framework will emphasize the links among the economy, the environment, social institutions, company practices, investor-mediated guardrails, and all forms of investor stewardship. This shift has meant some organizational changes at TSC. Chief Strategy Officer Sara E. Murphy, who filed those 20 proposals five years ago, and has been advocating for guardrails ever since, has taken her considerable expertise as a system steward to the Sierra Club Foundation. TSC is immensely grateful for Sara’s dedication and passion for system stewardship during her time at the organization. We could not have had a better partner to launch TSC’s work and look forward to many more years of collaboration with Sara and her new colleagues.

With our shift towards the development of a new consensus framework, we are thrilled to announce that Dan Osusky will come on board as Chief Research Officer beginning October 1. Dan, who has held critical roles at B Lab and the International Foundation for Valuing Impacts, will lead our efforts to develop the framework.

We envision the development of this framework as a broad collaborative process that serves a central role in a movement that takes system stewardship from the early adopter stage to a majority position among investors. Interested in being on the ground floor of this work? Email TSC to get more information.

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Recently, TSC’s CEO Rick Alexander had the opportunity to speak at Stewardship in Turbulent Times, a symposium held at Blavatnik School of Government, University of Oxford. Rick’s remarks at the symposium reflect TSC’s view that authentic and effective system stewardship requires a deep shift in attitudes about what it means to succeed in business and investing, and, in particular, how externalities must be incorporated into market mechanisms. The remarks are reprinted below and provide insight into our oncoming project related to the consensus framework:

Making Markets Work for Everyone

Rick Alexander

I know that everyone in the responsible/sustainable investing field has good intentions.

I know we want to find viable investment strategies that preserve the environment we rely upon and the dignity and welfare of the people with whom we share that environment.

I know we want strategies that will work; we are not looking for clever ideas that cannot actually be executed.

And I know that many of us feel a compounding sense of urgency—the planet is warming, children are mining in dangerous pits, and critical institutions are under threat. It feels as if we don’t have time to start all over—it feels as if we must start applying patches right away or systems will begin collapsing.

But I fear that this perceived need for practical and immediate solutions to fundamental problems means that we continue to work within the basic market paradigm, using markets to measure success and allocate resources. More specifically, we utilize markets that rely upon individual company returns to measure success and thereby allocate capital, using company profitability to determine what entities to fund and how those entities should operate in the real economy. Examples include:

• How much cement and steel should be produced and how carbon intensive a process should be used?
• Do we accord workers freedom of association and pay them a living wage?
• Do pharmaceutical companies release data that underlies studies showing drug efficacy?

These classic business decisions inevitably reflect capital market preferences; business practices that increase the cash flow and enterprise value of individual companies are rewarded in the capital markets, leading executives to treat corporate value maximization as their North Star. Of course, public policy can affect these decisions as well, but those policies at most establish the space within which business decisions are made. And in considering the full set of feedback loops influencing corporate decision-making, it is important to remember that government policies may themselves reflect capital allocation decisions because businesses invest heavily in public influence and lobbying in order to impact those policies.

Let me be clear: I am not suggesting we need to move away from a market-based economy. Markets are essential tools for price discovery and resource allocation. The paradigm we must move away from is the idea that the unit at which markets measure success must always be the individual firm. This deeply ingrained practice leads to business models that threaten critical social and environmental systems.

Start with the example of equity-based compensation: it obviously is meant to encourage executives to raise share prices; even when care is taken to make sure the share price increase is long-term, the idea is that company financial success equals success for investors. The same idea reigns in active asset investment management. If managers choose companies that beat a benchmark financially, they are judged successful—because the value of individual companies has risen. The same logic lies behind a 2/20 compensation scheme for a private equity manager—raise the value of the portfolio companies and the managers will be richly rewarded.

But a narrow focus on individual company value omits critical information: we all know that companies can externalize costs that are not reflected in their cash flows or enterprise value. Carbon emissions are the quintessential externality, but once you start looking, you see them lurking behind many successful business models.

Products that lead to diseases like lung cancer and diabetes may be very profitable but are a huge drain on the economy. The inequality implicit in many compensation models is a severe drain as well. One area of particular concern to me is overuse of antibiotics, which undoubtedly increases margins in the meat supply chain, but threatens to completely debilitate our medical system by breeding antimicrobial resistant organisms.

While these costs may be external to companies, they are not external to these companies’ investors, i.e., capital-providing asset owners, all of whom, to a rough approximation, are diversified among many investments.

This is a real issue: climate change is going to result in overall equity portfolios being worth 30-40% less over the coming decades. That is a big hit. If energy producers or logistics companies held in my retirement account decide to stay the current fossil fuel course in order to maximize their own cash flows, they are making a bad trade on my behalf—their stock price increases, but only through a decision that threatens my diversified portfolio.

Until we address the divergence of interest between company managers and their largely diversified shareholders (and society) into investing and stewardship practices, we are going to keep patching a system that is built to fail—that literally incentivizes the very behavior we need to curb to optimize overall return over the long run.

What would things look like in a different model? One where we kept markets, but accounted for externalities—at least to the extent that those externalities threatened investors? Here are a few ideas:

• Equity compensation would remain, but if a company didn’t meet appropriate climate targets, the equity would be clawed back.
• Active investment managers would operate under mandates that required them to address externalities generated by portfolio companies through effective stewardship and could not claim credit for alpha generated by companies with unresolved sustainability issues. Beating the market would be considered a failure if it were done by owning companies that extracted systemic value.
• Private equity carries would be subject to sustainability hurdles as well as financial ones, so that gains generated by unsustainable practices that threaten overall market returns would not benefit the managers.

It may sound unrealistic for a company’s owners to tell its executives that value maximization at the company is not always in the shareholders’ interests, but as long as we reward executives and asset managers for alpha generated by practices that extract social and economic value, markets will continue to allocate resources to those practices, and all the ESG targets and polite engagements in the world will not change outcomes.

Changing the inclination to always maximize value at the level of individual companies is a paradigm shift, with all of the difficulty and disruption that term implies. But given our reliance on markets as the primary allocator of resources in the economy, the shift is imperative if we want to avoid catastrophe.

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At The Shareholder Commons, we believe it is time to develop a clear framework for investors to insist upon a capital market designed to serve their needs, rather than the dangerous principle of company value maximization. The core of the framework will be a four-step analysis:

• Identify systemic issues that are likely to impact portfolio value.
• Identify company practices that contribute to such issues.
• Identify “guardrails,” i.e., limits on such practices.
• Identify specific shareholder actions that would be effective to implement such guardrails.

This framework will be designed to enable collective action by investors to shift away from markets that reward dangerous extractive practices to markets that incentivize authentic value creation that leaves the global commons intact. We hope we can persuade committed professionals like you to join us on this journey.